Scottish airports and York Aviation lobbying, yet again, for a cut in APD

Date added: November 1, 2012

Scottish airports are, yet again, hoping to get a drop in Air Passenger Duty, to try and keep flights under-taxed. Edinburgh, Glasgow and Aberdeen airports are calling on the UK government to abolish APD or at least frozen and then reduced. A new report by York Aviation (they produced one in February 2011 for BAA Scotland) says Scotland will lose 2 million passengers and £210 million a year in lost tourist spending because of APD. Strangely, this figure is massively higher than it was only a year and three quarters ago. In February 2011 York Aviation only said that ” …over the next three years, Scottish airports will lose around 1.2 million passengers, with the largest numeric losses on domestic services.” So a very sharp increase. Dodgy assumptions and calculations? York Aviation and the airports, as they always do, only consider tourist income of visitors coming to Scotland, and completely ignore the money lost by Scots flying out to spend their holiday money abroad. And of course, completely ignores the tax breaks that air travel receives from paying no VAT and no fuel duty.Tweet

Tax on air passengers ‘costs Scotland £210m’

SCOTLAND will lose two million passengers and £210 million a year in lost tourist spending because of air passenger duty (APD), Scotland’s three main airports claimed today.

Edinburgh, Glasgow and Aberdeen want the UK Government tax abolished, or at least frozen then reduced.

They expect it to be further increased in Chancellor George Osborne’s autumn statement next month. The airports, which collectively handle some 20 million passengers a year, said they would have secured key new routes, including North America, if APD had been lower.

The claim comes despite route expansion at all three airports since the last APD hike in April, such as a second daily Emirates flight between Glasgow and its Dubai hub, and EasyJet basing two extra aircraft at Edinburgh to serve six new European routes.

Research published todaym,l which was commissioned by the airports from consultants York Aviation, predicted the passenger and spending losses by 2016, on the basis of Treasury forecasts of rising receipts from the tax.

It highlighted that APD levels had been increased over the last five years for short-haul passengers by more than two-and-half times to £13. Long-haul rates have increased by up to four-and-a-half times to £92 for the longest trips, with those travelling in business or first class paying even more.

A family of four flying to Spain pay a total of £52 compared to £20 in 2007, and £260 to Florida, up from £80.

Edinburgh airport chief executive Gordon Dewar said: “The impact of this tax goes far beyond the boundaries of the airport, not just in Scotland but across the world. Airlines are telling us they are seeing it have an impact on passenger flows, which is ultimately having an impact on their decision making on where to put planes.”

Glasgow airport managing director Amanda McMillan said: “Due to the size of the market in Scotland, we will always find it difficult to attain and sustain new routes, and this situation is compounded even further by APD, which simply serves to artificially depress demand and dissuade airlines from basing aircraft here.”

Transport minister Keith Brown repeated his call for APD to be devolved, as it was in Northern Ireland a year ago.

Aviation consultant John Strickland said there was a case for different APD rates across the UK, which had been a key factor in United Airlines retaining its Belfast-New York route.

He said: “The further north, the greater sensitivity to price, particularly for leisure travellers.

“I wouldn’t be too optimistic of reform. There tends to be a more blinkered view of earnings for the Treasury from the tax without acknowledgement of the wider negative economic impact.

Dr Dan Barlow, head of policy for environmental campaigners WWF Scotland, said: “If the Scottish Government call for APD to be devolved is simply to enable them to increase flights, this would be a backward step for the environment.”

[This is highly disingenuous. It completely ignores the inconvenient facts that more Scots use air travel to fly out of Scotland, in order to spend their holiday money elsewhere, than fly in to spend their cash on Scottish holidays. The cost of APD might have slightly cut these, though only £13 per person for APD for a trip to Europe is, frankly, not high enough to have much effect on numbers travelling. It also ignores the massive tax break that aviation receives from paying no VAT on anything and no fuel duty. It has been estimated that even with the current rates of APD, they would need to be increased about four-fold to make up the deficit caused by being exempt from VAT and fuel duty. So the industry is NOT over taxed. Air travel, like all other sectors, needs to pay its way. The majority of journeys are discretionary, for leisure purposes. They are not fundamental necessities that can justify being under taxed. This APD campaign is very self serving by the aviation industry. The rest of the UK economy needs the tax revenue that is due from aviation].

This 2011 report says: ” …over the next three years, Scottish airports will lose around 1.2 million passengers, with the largest numeric losses on domestic services. However, it also suggests a decline of up to 5% for certain long haul services…” and

“…Falling demand will also knock-on to losses in employment at Scotland’s airports, which are often vitally important components of local and regional labour markets, and impact on the tourism industry, with around 148,000 trips and £77 million in visitor expenditure lost over the next three years….”

But the article by the Scotsman today says: “…SCOTLAND will lose two million passengers and £210 million a year in lost tourist spending because of air passenger duty (APD),..”

So the current report puts the figures massively higher ! APD has only gone up from £12 to £13 in that time.

 The UK Government has significantly increased rates and restructured APD since 2007. Rates for short haul travel have increased by around 160% but it is long haul travel that has really been penalised with rates increasing by between 225% and 360%. This has been done at a time, latterly, when Scotland and the rest of the UK have been experiencing one of the worst recessions in living memory. Furthermore, there would appear to be evidence that further rate increases may occur in the future.

 The UK appears to be out of step with much of the rest of Europe on this issue. Rates are higher than elsewhere by some margin and while some others are abolishing or reducing the burden on passengers, the UK has increased it. Austria and Germany have recently introduced similar taxes but these are considerably lower and appear to have been reduced slightly after the first year of operation.

 Scotland and its economy is particularly reliant on air service access, being geographically peripheral from the key centres of Europe and the UK and with its history as a trading nation, reflected particularly in Edinburgh and Glasgow positions as international financial and business services centres, and in Aberdeen’s position as a key global centre for the energy industry. Tourism is also a key component of the economy, bringing visitors from around the world. Any loss of connectivity will impact on Scotland’s competitiveness with long haul routes recognised as being of particular economic and strategic importance to the Scottish economy.

 The impact of the changes in APD since 2007 has been significant. Each increase or change in structure has resulted in a widening of the gap between actual performance and what Scotland’s airports could have achieved without APD.

 In our analysis the initial doubling of APD in 2007 has an initial dramatic effect with around 1.2 million passengers lost in 2007. The next significant step comes with the increase in rates in November 2010. In 2011, the first full year of impact, the gap between the Without APD increases case and the With APD Increases case grows from around 1.4 million in 2010 to over 1.7 million in 2011. By 2016 the total difference in traffic has reached around 2.1 million passengers per annum.

 Over time the impact becomes increasingly concentrated on international traffic, with longer haul passengers particularly affected. This focus of the impact on international traffic is particularly concerning given the policy aims of the Scottish Government to grow the Country’s international connectivity.

 In terms of the knock-on impacts to the Scottish economy, APD will over the long term reduce traffic and connectivity from Scotland’s airports, impacting on inward investment, trade and competitiveness. It also impacts on Scotland’s inbound tourism industry. By 2016 we estimate that £210 million per annum less will be being spent in Scotland by inbound visitors than if APD had not risen as it has since 2007. It should also be remembered that Scotland’s airports are major employment centres in their own right and that APD’s impact on traffic will limit the role they can play as generators of job opportunities and prosperity. We also estimate that in broad terms the impact of APD on other tax revenues in Scotland could be around £50 million by 2016.